Pound Australian Dollar (GBP/AUD) Exchange Rate Buoyed by Disappointing Australian Jobs Report
The Pound Australian Dollar (GBP/AUD) exchange rate is trending higher this morning, after Australia reported a much larger-than-forecast rise in unemployment.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.8354, up roughly 0.4% from this morning’s opening levels.
Australian Dollar (AUD) Slumps amid Sharp Rise in Domestic Unemployment
The Australian Dollar (AUD) is facing broad based selloff this morning, in response to a disappointing jobs report.
The Australian Bureau of Statistics (ABS) reported the domestic jobless rate climbed from 4.6% to 5.2% in October, much worse than an expected rise to 4.8% and dampening expectations for the next rate hike from the Reserve Bank of Australia (RBA).
October’s surge in unemployment comes as the states of New South Wales and Victoria emerged from lockdown, something which economists has expected would help boost employment.
However, the lifting of lockdowns measures also resulted a sharp rise in the participation rate, as more people started to look for work, which appears to have warped the statistics somewhat.
Bjorn Jarvis, head of labour statistics at the ABS, said
‘It may seem counterintuitive for unemployment to rise as conditions are about to improve. However, this shows how unusual lockdowns are, compared with other economic shocks, in how they limit being able to work and look for work.’
Pound (GBP) Undermined by Weaker-than-Expected GDP Print
While it is faring well against the Australian Dollar this month, the Pound (GBP) is struggling to replicate this success against the majority of its others peers, following the release of the UK’s latest GDP release.
According to preliminary figures published by the Office for National Statistics (ONS), the UK economy grew by 1.3% in the third quarter. This was down from 5.5% in Q2 and missed forecasts for a slightly healthier 1.5% expansion.
The underwhelming release has tempered the upside potential of the GBP/AUD exchange rate this morning as it is seen as further reducing the odds of the Bank of England (BoE) hiking interest rates before 2022.
Suren Thiru, head of economics at the British Chambers of Commerce, comments:
‘The UK economy is only likely to return to its pre-pandemic level next year, behind many of our international competitors.
‘With the headwinds facing the UK economy growing, we would caution the BoE against raising interest rates in the near term to avoid destabilising an already brittle recovery.’
Pound Australian Dollar Forecast: Brexit Jitters to Pressure Sterling?
In the absence of any notable GBP or AUD data releases, movement in the Pound Australian Dollar exchange rate through to the end of the week may be driven primarily by Brexit developments.
This could see Sterling struggle to sustain its recent gains, as recent headlines suggest talks regarding the renegotiation of the Northern Ireland protocol remain deadlocked, with the UK government still threatening to trigger Article 16.
GBP investors fear such a drastic move could trigger a UK-EU trade war, and further undermine the UK’s economic recovery.
Meanwhile, the Australian Dollar could also struggle to attract support, amidst broad US Dollar (USD) strength.